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Renesas Falls Most in Four Months on Loss Forecast: Tokyo Mover

Renesas Falls Most in Four Months on Loss Forecast
A Renesas Electronics Corp. central processing unit board and microcontrollers are arranged for a photograph in Soka City, Saitama Prefecture, Japan. Renesas cut its full-year sales forecast to 770 billion yen from 820 billion yen. Photographer: Kiyoshi Ota/Bloomberg

Feb. 12 (Bloomberg) -- Renesas Electronics Corp., the Japanese chipmaker getting a bailout from a state-backed fund, plunged the most in more than four months in Tokyo trading after widening its full-year loss forecast.

The stock tumbled 8.4 percent to close at 262 yen, the biggest decline since Sept. 25. The Nikkei 225 Stock Average rose 1.9 percent.

Renesas on Feb. 8 widened its annual loss forecast to 176 billion yen ($1.9 billion) amid a slowdown in TV sales hitting demand for system LSI chips and weaker-than-expected sales to automakers. The Kawasaki, Japan-based company has also announced more than 10,500 job cuts since July and plans to sell 150 billion yen of new shares to investors led by state-backed Innovation Network Corp. of Japan.

“The fourth quarter will be a pivotal quarter in which earnings improvement is critical,” Yukihiko Shimada, an analyst at SMBC Nikko Securities Inc., said in a Feb. 8 note. The company’s goals in the quarter “look challenging,” said the analyst, who reiterated an underperform rating and a 250 yen target price.

Renesas cut its full-year sales forecast to 770 billion yen from 820 billion yen. It predicted an operating loss, or sales minus the cost of goods sold and selling, general and administrative expenses, of 26 billion yen, compared with the previous target of a 21 billion-yen profit. The company had earlier expected a loss of 150 billion yen in the year ending March.

Job Cuts

Renesas last month announced plans to shed more than 3,000 workers following the removal of about 7,500 positions through a buyout program in October. In total, job losses amount to about 25 percent of the workforce. The company also said last month it will sell three factories to J-Devices Corp.

INCJ will hold 69 percent of Renesas after the new share sale. The chipmaker will use the money from the state-backed fund and investors including Toyota Motor Corp. and Nissan Motor Co. to develop more advanced microcontrollers used in cars and TVs. It may also get another 50 billion yen from INCJ.

Renesas is currently 91 percent owned by NEC Corp., Hitachi Ltd. and Mitsubishi Electric Corp., which helped form the company through the merger of various chip-making businesses. Fujitsu Ltd. and Panasonic Corp. last week announced plans to combine their LSI chip businesses in a deal that may get funding from the state-backed Development Bank of Japan.

The “door is open” for Renesas to join the venture, according to Fujitsu President Masami Yamamoto.

To contact the reporter on this story: Naoko Fujimura in Tokyo at nfujimura@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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